...at least not the economy, despite what Acting Victorian Premier Rob Hulls says to the contrary.
The Victorian Government says new economic modelling has vindicated its decision to pay for golfer Tiger Woods to play at last year's Australian Masters.
"Original projections were that the 2009 JBWere Masters would generate a $19 million boost to the Victorian economy but, due to unprecedented ticket sales and public interest, the actual impact was almost double what was forecast."
Woods received an appearance fee of $3.25 million, with the state government chipping in $1.5 million.
Major benefactors included major hotels, restaurants, taxis and the retail sector.
This is a classic example of failing to take account of Bastiat's warning to consider what is not seen, as well as what is seen, when deciding where best to allocate taxpayer dollars. Yes, hotels, restaurants, taxis and retail did remarkably well for a brief period and who knows, maybe a few extra tourists will now visit as well. But this only what is seen. At first glance, it appears obvious that Woods was a boost to the local economy. Indeed, when I examine the comments on the two linked news articles above, almost all of them are full of praise for the government. But what happens when we look at what is not seen? The dollars expended to lure Woods had to come from somewhere.
If people are spending their money at local restaurants because they're there to watch Woods, there are other places - perhaps restaurants in their own neighbourhood - where they are not spending that money. The money spent by the state, whether raised through taxes or borrowing, would have been spent by someone on something else (with the expected benefits of these alternate projects being the opportunity cost of luring Woods).
The economic reports as quoted and paid for by the government always fail to apply an appropriate cost to the initial funds in their cost-benefit analysis. I don't have access to the report that Rob Hulls is quoting, but having read others I can only assume that they simply state the $1.5 million is like "mana from heaven" and does not represent a loss to the taxpayers when in reality, they should begin with a huge number in the cost bracket. Unfortunately we can never know what the money would have been spent on had the government not expropriated it for this purpose. But what we can say is it would have been used to satisfy the most urgent demands of consumers. The funds used to lure Woods, having been diverted from this most urgent - and therefore most valuable - use, must rank lower. Unfortunately modern cost-benefit analysis does not take any of this into account.
Yes, the cost to the individual taxpayer is relatively small and the benefits to large interest groups (golf, hoteliers, food, transport, retail and so on) who contribute significantly to government campaigns are enormous in comparison. But at the end of the day, if there was a profit to be made in luring Woods to Melbourne, private investors would likely have been quick to act to take advantage of the opportunity with their own funds. Instead, particular lobby groups have convinced the government to support Woods because it was not clear to them whether his arrival would have been profitable without taxpayer funding.
Unfortunately the majority of the population never even thinks about what is not seen. Economists who prepare reports for the government to justify their various subsidies - whether through ignorance or greed - never consider what is not seen (if they did the government would stop hiring them to prepare said reports!). I personally think that every high school student, well every person, should read Bastiat's short but brilliant essay The Broken Window. So much damage could be averted if people just considered what is not seen when deciding whether economic policy is worthwhile.